Builders to Hail Home Sales, Decry Low Margins

New-home sales have not been this strong since the late 1970s, but optimism is likely to be tempered by caution as about 30,000 home builders gather for the industry's annual convention in Dallas today.

"We've got to be very careful we don't overbuild," said Rick Porter, president of Atlanta-based Richport Properties Inc.

"You have thousands of entrepreneurs deciding when to build and how much. It makes it very hard to make sure we're not overbuilding."

In the 1970s, baby boomers were buying their first homes, driving sales to record heights. This time around, the boom is occurring almost despite demographics.

First-time homebuyers in the '90s belong to the small baby bust generation, which is taking even longer than boomers did to set up housekeeping.

The industry's strength these days depends on plentiful jobs and super- confident consumers.

When the economy slows, as most expect it to this year, builders may be vulnerable to slackening demand.

So far, however, inventories of unsold new homes are unusually small.

The National Association of Home Builders, which hosts the annual event, estimates that 767,000 new homes will be sold this year, down from an estimated 802,000 new homes in 1997.

Despite the flush times, the industry's profitability is likely to be a hot issue at the convention, according to Kent Colton, president of the association.

The trade group's typical member builds as few as 15 houses a year, at a profit margin of 5% to 7%, Mr. Colton said.

He said the builders in Dallas will zero in on the bottom line: "How can I continue to make profits in business?"

L. Earl Armiger, president of Orchard Development Corp., Ellicott City, Md., blamed the low margins on competition from large builders who are willing to sacrifice profits for market share, as well as on higher costs for land, building materials, and government permits.

"Sales may be at the level of the early 1980s, but profitability is not there," Mr. Armiger said this week.

The builders are among Washington's most vigorous lobbies, and their convention will reflect that.

The trade group backs a bill that would make it easier for property owners to appeal local restrictions on land use in federal court.

The House of Representatives has already approved a version of the bill.

The Senate has yet to act.

Also on the convention's agenda: opposition to federal government rules protecting endangered species and wetlands.

"We clearly want to protect the environment, but what's the right balance between economic growth and the environment?" Mr. Colton asked.

The group also wants the Federal Trade Commission to exempt certain predrilled Canadian lumber from strict import quotas that it says have made lumber prices more volatile than ever.

Builders also say they will be trolling for new ideas in Dallas.

Mr. Porter, the Atlanta builder, said he wants to learn more about a new kind of suburban development in which residents do not have to drive, for example, to go shopping.

He predicted that this kind of development will become a trend.

Mr. Armiger, the Maryland developer, said smart builders will be keeping their eyes trained on graying boomers.

He said builders will be taking seminars on "building for empty-nesters and retirees" so that they can lessen their reliance on young suburban families.